Rent Control
in California

In the 1970s, California seemed an unlikely place for a
broad movement for tenants' rights. As Heskin notes, "Aspiring tenant
organizers considered the California tenant to be too individualistic and
too mobile to be organized" and "the densities of renters too
low for mass collective action."[72] But a California tenants movement
exploded in l978 following passage of Proposition 13, the tax-cutting amendment.
California had an upsurge of tenant activism in the late l970s and early
1980s, and then -- with a few local exceptions -- experienced a lapse starting
in the mid-l980s which continued into the 1990s.

During much of the l960s, apartment vacancy rates in the state's urban areas
were high; some landlords even complained of an "apartment glut."[73]
This began to change in the l970s, as rental apartment construction fell,
vacancy rates fell, and rents increased faster than inflation. Moreover,
skyrocketing housing prices shut out many middle-class households from homebuying.
Except in Berkeley, however, there was little tenant activism in response
to these changing market forces. In 1972, Berkeley voters passed a rent
control charter amendment through the initiative process. The city began
to implement the law, but landlords successfully challenged the amendment
in court. In Birkenfeld v. Berkeley, the Alameda County Superior
Court (in 1973) and the state Court of Appeal (in June 1995) held that the
Berkeley law was unconstitutional on procedural grounds, but it found that
cities had the right to adopt rent control without further state legislation.

In 1975, Senator David Roberti filed a rent control bill that died "quickly
and quietly" in the Senate Judiciary Committee, a reflection of the
weak political constituency at the time.[74] In the mid-1970s, even before
the upsurge of tenant activism, California's real estate industry recognized
the potential for a wave of tenant protest and demands for rent regulations,
especially in light of Birkenfeld v Berkeley. In 1976, the California
Housing Council, a new coalition of the state's major apartment developers,
owners, and managers, along with their allies among realtors and smaller
landlords, pushed a bill (AB 3788) through both houses of the state legislature
pre-empting localities from adopting rent control. A fledgling California
Renters Coalition was too weak to effectively oppose the bill in the legislature
or the media. But on the advice of his liberal housing department director,
Arnold Sternberg, and with the support of his liberal constituency, particularly
Jack Henning, the head of the state AFL-CIO, Gov. Jerry Brown vetoed the
bill, angering the real estate community.[75]

Sensing that a battle was brewing, a handful of tenant organizers and legal
aid attorneys recognized that they needed to be better organized and in
l977 250 activists met in Los Angeles to form the California Housing and
Information Network (CHAIN) to serve as the umbrella coalition for tenants'
rights.[76] A few local groups, such as the Coalition for Economic Survival
(CES) in Los Angeles, began to organize tenants around rent increases, evictions,
and maintenance issues. In 1977, CES and the Gray Panthers, a radical senior
citizens group, began pushing the Los Angeles City Council to adopt rent
control, initially promoting ordinances against "rent gouging."
Simultaneously, tenants in Santa Monica launched an effort to place a rent
control initiative on the June 1978 ballot. These groups were able to mobilize
hundreds of tenants for public hearings and rallies. Smaller efforts were
underway in Santa Barbara, Santa Cruz, Long Beach, and San Diego, while
tenants continued to push for rent control in Berkeley.

Gov. Brown's veto of the CHC's pre-emption bill proved fateful, because
demand for rent control exploded across the state in the aftermath of Proposition
13. Proposition 13 was spearheaded by ultra-conservative political forces.
The leader of the tax revolt was Howard Jarvis, chief executive of the Apartment
Association of Los Angeles County, who sent a mailing to landlords urging
them to "convince your tenants that lower property taxes mean lower
rents."[77] A month before election day, the California Apartment Association
announced that landlords would pass property tax savings onto tenants if
Proposition 13 passed. Recognizing the dangers of a tenant backlash if landlords
failed to fulfill their promises, the CHC opposed Proposition 13.

On the same day that Proposition 13 won by a two-to-one margin statewide,
rent control initiatives were defeated in Santa Monica (56-44%) and Santa
Barbara (by roughly the same margin), even though tenants represented a
majority in both communities. Real estate interests poured huge sums of
money to defeat these referenda.[78] An analysis of voting results revealed
that precincts that favored Proposition 13 voted against rent control, often
by a similar margin. Throughout the state, in fact, voters who opposed rent
control thought that property taxes were the cause of high rents. They expected
Proposition 13 to hold down rents.
The California Housing Council was the only major real estate industry group
to oppose Proposition 13.[79] After Prop 13 passed, the CHC sent a letter
to its members across the state urging them to reduce rents.[80] But the
anticipated windfall of rent rollbacks did not materialize. In fact, many
of California's 3.5 million tenants received notices of rent increases
shortly after Proposition 13 passed. This set the stage for a significant
tenant backlash. Throughout the state, tenants who had been hit by rent
increases organized meetings to demand that landlords share their property
tax savings. Newspapers were filled with stories of outraged renters, embarrassed
landlords, and politicians jumping onto the bandwagon. For example, Los
Angeles Mayor Tom Bradley, who had earlier lent his name to the anti-rent
control campaign in nearby Santa Monica, called for a citywide rent freeze
ordinance. As public clamor mounted, some landlords agreed to voluntarily
reduce rents in order to avoid mandatory rollbacks and freezes.

Tenant pressure did not subside. Governor Brown established a renter "hotline"
which, at one point, was receiving 12,000 phone calls a day to register
complaints about rent hikes.[81] When heavy real estate industry lobbying
defeated a statewide bill requiring landlords to pass on Proposition 13
savings to tenants, the battle shifted to the local level. Groups like CES,
the Gray Panthers, CHAIN, and Tom Hayden's statewide Campaign for Economic
Democracy (which grew out of his unsuccessful bid for U.S. Senate in 1976)
organized tenants and kept the anger about post-Prop 13 rent hikes in the
news. Tenant groups began to mobilize in communities across the state, demanding
rent control. Experienced tenant leaders began to travel across the state,
helping local groups. Newspapers reported an upsurge of rent strikes, even
in the politically moderate San Fernando Valley section of Los Angeles.[82]

By 1981, more than 25 California communities, including Los Angeles and
San Francisco, had passed some kind of rent control laws. By 1988, 78 communities
in California had some form of rent control, although in 64 of these jurisdictions
rent control was limited to mobile homes. In the 14 cities where rent regulations
covered apartments, nearly one million units were covered.[83] Eleven of
those 14 laws were enacted by ordinance. In Berkeley, Santa Monica, and
Cotati, they were put into place by voters through the initiative process.
In nine of these jurisdictions, the rent regulations not only covered rents,
but included "just cause" eviction, limiting landlords' ability
to evict a tenant without due process and cause. Los Angeles, Palm Springs
and Thousand Oaks exempted so-called "luxury units" from rent
regulations. Several cities exempted single-family homes; some exempted
condominiums. Twelve of the 14 jurisdictions (except Los Gatos and Cotati)
exempted new construction from rent regulations. Nine of the jurisdictions
provide for vacancy decontrol, allowing landlords to set rents at market
levels when a tenant voluntarily vacates an apartment; in six of these jurisdictions,
the law requires that the unit be placed back under rent regulation after
the new tenant moves in and the landlord has set the market rent. Berkeley,
Santa Monica, West Hollywood, East Palo Alto, Cotati, and Palm Springs did
not allow vacancy decontrol. Local rent boards set rent levels each year,
no matter how many times the units turn over. Jurisdictions vary in the
formulas they use to set rent increases.[84]

In response to tenant pressure, rent strikes, and steady news coverage about
rent increases and angry tenants, especially seniors, the Los Angeles City
Council passed a six month rent freeze in August 1978.[85] As the rent freeze
was reaching its end, tenant forces and their allies pushed for a permanent
and strict rent regulation law. The City Council adopted a somewhat watered-down
version of regulation, including vacancy decontrol and an exemption for
single-family homes, which went into effect May 1, 1979. This law was reviewed
annually by the City Council, with minor changes. In 1981 the City Council
made significant changes. The original law permitted a 7.6% rent increase
annually. After 1981, this was reduced to a 5.6% annual rent increase. From
the beginning, landlords were allowed to raise rents more freely when an
apartment became vacant, but then adjusted further rent increases for the
new tenant. The original law allowed new rents to be set to market levels.
The new law limited rent increases to 10%. Both laws exempted new construction,
hotels, single family dwellings and so-called "luxury units" (those
with rents above a specific level. Both laws contained "sunset"
provisions which would end rent control if the vacancy rate in Los Angeles
rental housing rose above 5%.[86]

The Los Angeles law did not apply to the unincorporated areas of Los Angeles
County, including West Hollywood, where renters composed 80% of the population.
Renters organized rent strikes and rallies with as many as a thousand demonstrators
and successfully pressured the county Board of Supervisors to pass a rent
control law that applied to unincorporated areas. The law included a "sunset"
provision and in 1985 the Board of Supervisors did not extend it. Fear of
this threat led activists in West Hollywood to seek to incorporate a new
city. Soon after West Hollywood became a separate city, the city council
adopted rent control in June 1985. Rent control was also the driving force
behind the efforts to incorporate a new city in East Palo Alto.[87] East
Palo Alto, which had about 3,000 rental units and a large African-American
community, was incorporated in 1983.[88] It adopted rent control a few months
later. Landlords were unsuccessful at repealing it with several city ballot
measures, sponsored by the California Apartment Owners Association.[89]

Rent control was the centerpiece of electoral activity in Berkeley and Santa
Monica, where progressive coalitions won majority blocs on the City Council
of each city. In the late l960s, Berkeley was a hotbed of "radical"
political activity, not only on the campus but also in the community. The
Berkeley Tenants Union was formed in 1969. It formed part of a coalition
of progressive activists who mobilized to gain a foothold in city government
with rent control one of their key platforms. After the courts reversed
the 1972 pro-rent control ballot measure on procedural grounds, the coalition
tried again. Rent control supporters put another initiative on the April
1977 ballot. It lost 63% to 37%. Following Proposition 13, Berkeley voters
approved a temporary rent freeze on the November 1978 ballot by 58% to 42%.
Voters adopted permanent full rent control in a June 1980 initiative. The
pro-tenant governing regime remained in power for almost two decades until
the pro-tenant majority on the rent control board was defeated by voters
in 1993.[90] A court decision over the meaning of a "fair return"
forced Berkeley to water-down its rent regulations in 1992, resulting in
major rent increases.[91] The Berkeley law regulated 21,000 of the 24,500
rental units in the City.[92]

In Santa Monica, a coastal city of 90,000 adjacent to Los Angeles, the tenants
movement formed the core of an ongoing governing coalition.[93] As noted
above, voters had defeated a rent control ballot measure in June 1978 by
a 55.5% to 45.5% margin, even though renters comprised 80% of the city's
residents. In the wake of Prop 13, activists regrouped. They formed a political
coalition, Santa Monicans for Renters' Rights (SMRR), which drew on a wide
group of senior citizen, consumer, Democratic Party, and housing activists.
SMRR put another rent control measure, Proposition A, on the ballot in April
1979.[94] Although SMRR was outspent $217,257 to $38,443, it effectively
mobilized renters as campaign volunteers. Proposition A won by a 54.5% to
45.5%.[95] A few months later, a pro-tenant slate, organized by SMRR was
elected to the rent control board. The next November, SMRR forces defeated
Proposition Q, a real estate industry-sponsored ballot measure to weaken
the rent control law by adopting vacancy decontrol. In 1981, SMRR's slate
won a majority of seats on the City Council and elected a SMRR leader as
mayor. The campaign mobilized over 6,000 people to get involved in phone
calling, door-to-door canvassing, and other electoral activities. Since
l981, SMRR has held a voting majority on the City Council, with the exception
of l984 through 1988. All of SMRR's candidates supported rent control and
tenants' rights, but they have included union leaders, a minister, a high
school teacher, a cab driver, a disabled activist, a lesbian activist and
others.

As a governing coalition, SMRR strengthened Santa Monica's rent control
and condo conversion law -- key issues in an attractive beach city that
was undergoing extremely strong development pressures. Indeed, Santa Monica's
rent control law was perhaps the strongest in the country; for example,
it did not automatically allow landlords to increase rents when they refinanced
their properties. SMRR also elected a majority to the rent control board,
guaranteeing that the law would be implemented effectively. Once in office,
SMRR enacted a broad progressive agenda that went beyond tenant problems.[96]
But a dent in the SMRR coalition involved a controversy over the city's
tolerance of homeless people in public places. Even in "the People's
Republic of Santa Monica," as opponents called the city, political
support for rent control was weakened in the early l990s by two forces:
a visible increase in homelessness, which landlords effectively linked to
the city's rent control law, and the Northridge earthquake of January 1994.
Complaints from businesses and other citizens led SMRR to toughen its policy
by allowing police to remove homeless vagrants from public places and require
them to move to a city-run shelter or day program.

Other cities joined the rent control list. The San Francisco Board of Supervisors
passed rent control (with vacancy decontrol) in 1979 to head off a stronger
initiative put on the ballot by community and tenant groups. San Jose's
law went into effect in l979. It was called the Rental Dispute Mediation
and Arbitration ordinance.[97]

Faced with all these local brushfire battles, and unable to get Gov. Brown
to sign a local pre-emption bill, the real estate industry's strategy was
to circumvent the liberal governor by putting the issue of pre-emption before
the voters in a statewide initiative.[98] Seeking to stop the rent control
momentum, the CHC, the umbrella lobby group of the state's largest landlords,
spearheaded the campaign for Proposition 10, which appeared on the ballot
on June 3, 1980. Voters overwhelmingly defeated Proposition 10 by a 65%
to 35% margin, despite the fact that the CHC outspent the opposition by
an 80-to-1 margin.[99] The landlord campaign used the usual arguments that
rent control stymied new construction as well as maintenance and thus have
a serious negative impact on the supply of rental housing. CHC polls showed
that, as a group, "landlords" were not well-liked.[100] (At the
same time, San Diego Mayor Pete Wilson successfully led the opposition to
a rent control initiative in that city).[101]

During the l980s, the statewide momentum for rent control slowed down. No
new cities enacted rent control laws, but neither did local politicians
seek to weaken rent control where it already existed. The real estate industry
recognized in 1987 that "rent control may no longer be the single hot
issue that it once was." While it was difficult to roll back existing
local laws, the industry saw that "rent control no longer draws the
overriding community concern that it once did."[102] In 1987, for example,
only one locality, Burlingame, sought to pass a rent control measure, and
it was defeated.[103] In 1988, the CHC helped defeat a citywide ballot initiative
for full rent control. In 1991, Mayor Art Agnos, who had been elected as
a rent control supporter, got the Board of Supervisors to pass full rent
control, but the real estate industry got the issue on the ballot and orchestrated
an expensive and successful campaign to repeal the Board's vote.[104] Then
in December 1991 the real estate industry helped police chief Frank Jordan,
a foe of rent control, defeat Agnos for re election. The ballot victory
and Jordan's election, in a liberal city with a big tenant majority, led
real estate interests to conclude that "rent control is not what it
used to be" as a political issue.[105]

The Politics
of Deregulation in California

Beginning in 1983, Assemblyman Jim Costa (D-Fresno) annually
introduced a bill on behalf of real estate industry (California Housing
Council, California Association of Realtors, California Apartment Association,
and California Building Industry Association) to weaken local rent regulation,
or what they termed "radical rent control ordinances."[106] The
Costa bills included a requirement for vacancy decontrol, an exemption for
new construction, and an exemption for single-family homes. In 1983 and
1984, his bills included mobile homes, but subsequent bills exempted mobile
homes.

Typically, the Costa bill would whiz thru the Assembly, whose leaders were
closely connected to real estate lobbyists, but bog down in the Senate,
largely at the behest of Senator David Roberti. Roberti was majority leader
and then president pro tem of the Senate. He represented part of Los Angeles's
San Fernando Valley, as well as parts of Hollywood, and was a major fundraiser
for his Democratic colleagues.[107] Roberti would assign the Costa bill
to the Senate Judiciary Committee, which had a strong liberal majority.
Invariably, the committee would reject the Costa bill.[108]

In fact, only Roberti's influence kept the state legislature from bowing
to landlord pressure to dismantle local rent laws. The real estate industry,
especially the California Housing Council, identified Roberti as their chief
obstacle to eliminating rent control. "As long as Roberti was there,
we couldn't win. So we focused our attention on the local level, just trying
to keep the lid on," explained the CHC's lobbyist.[109] By the early
1980s, tenant organizing in California had declined significantly. Only
in Santa Monica, and to a lesser degree in West Hollywood, East Palo Alto,
and Berkeley, did tenant organizations wield significant political influence.
Roberti consistently warned tenant activists and cities with rent control
not to get complacent, and encouraged them to organize, since he would not
be in the legislature forever, but they did not heed his warnings. In the
big cities like San Francisco, Los Angeles, and San Jose, tenant organizing
was ineffective. But, according to CHC lobbyist Steve Carlson, "the
rent control forces never had to assert themselves so long as Roberti was
there. It was a slam dunk."[110]

Over the years, apartment owners and other real estate interests invested
millions in campaign contributions to support anti-rent control legislation.
A 1987 report by the California Association of Realtors claimed that the
industry had spent over $14.2 million to fight rent control. About $5.6
million was spent on Proposition 10 in 1980. A more recent estimate claimed
that in the past 12 years, the industry spent an estimated $50 million to
fight rent control -- pouring money into local rent control ballot initiatives,
city council, legislative, and gubernatorial races, and efforts to unseat
Roberti. A real estate lobbyist explained, "it is a small investment
when you consider a billion dollars or more in apartment real estate values
are at stake."[111]

In some ways, rent control's fate was doomed in 1988, when California voters
passed an initiative imposing term limits on state legislators. That meant
that Roberti would have to leave the state Senate in l995. In 1994, the
real estate industry and the National Rifle Association (angered by Roberti's
support for strong gun control) tried to evict Roberti from the legislature
a year early by sponsoring a recall campaign in his new Senate district.
The recall effort by NRA failed with Roberti garnering help from housing
activists from Santa Monica and other cities outside his new district.[112]
Tenant activists from as far away as San Francisco came to the San Fernando
Valley to campaign against the recall vote.[113]

After the recall effort failed, but knowing that Roberti would be out of
office after 1995, the real estate industry set the stage for the following
year's battle. Again, Costa filed his legislation. Again, it sailed through
the Assembly and wound up in the Senate Judiciary Committee. A public hearing
was held in June 1994. This time, however, the vote was closer than in earlier
years. A number of Democrats who in the past had voted with Roberti broke
ranks and others had to have their arms twisted by Roberti and labor leaders.
A hearing was held in Sacramento in June.[114] But they came within one
vote of passing the bill in the Judiciary Committee. The deciding vote was
cast by Sen. Art Torres, a liberal Democratic, who was also leaving office.[115]
Tellingly, Sen. Bill Lockyer, who would replace Roberti as president pro
tem, abstained. In June 1994 the state Senate voted against the bill.[116]
According to CHC lobbyist Steve Carlson, "It seemed to us that we were
getting closer." As president pro tem, "Lockyer wouldn't make
this a life-or-death issue that way Roberti did."[117] Defeated, Costa
withdrew his bill on August 16, 1994, but it was already clear that Roberti's
grip had weakened and that the real estate industry was flexing its muscles
for the next legislative session.

Several factors changed the balance of forces.[118] Roberti was forced to
leave the Senate because of term limits; his final term ended in December
1995. Senator Bill Lockyer, no ardent fan of rent control, was elected president
pro tem. Also, Costa was elected to the Senate. In 1995, the Republicans
won control of the Assembly. The political center of gravity had shifted
to the right.[119] Governor Pete Wilson was re-elected in November 1994,
defeating Kathleen Brown. A long-time opponent of rent control, going back
to his tenure as San Diego mayor, he was certain to sign any anti-rent control
bill.[120]

In 1995, the San Jose Mercury-News described the Costa bill as "moving
smoothly" through the legislature.[121] Costa bill was approved by
a 5-2 vote in Senate Judiciary Committee on April 4, 1995.[122] Senator
Nicholas Petris, a liberal Democrat who represented Oakland and Berkeley
and was a member of the Judiciary Committee, as well as a long-time supporter
of rent control, voted for the Costa bill in the Judiciary Committee, sending
it to the Senate floor.[123] The Senate passed the Costa bill on May 23,
1995 by 22 to 14 vote, one more than the majority required.[124] Ironically,
Petris voted against it once it reached the floor.[125] The Assembly Housing
and Community Development Committee approved the bill 6-2 on June 21, 1995.[126]
The bill was approved 10-7 by the Assembly Appropriations Committee in July,
1995.[127] On July 24, 1995, the Senate (24-11) and Assembly (45-18) passed
the Costa/Hawkins bill.[128] To win Assembly passage, Democrats supported
compromise provisions that phased in rent increases over 3 years, then allows
full decontrol. Rents can go up 15% the first year.[129] Wilson signed the
bill on August 4, 1995, with the law to go into effect on January 1, 1996.[130]

Opposition to the Costa/Hawkins bill was very feeble. Only Santa Monica,
West Hollywood, Berkeley, East Palo Alto, and Cotati would be significantly
affected, because the other cities with rent regulations already had vacancy
decontrol. San Francisco and Los Angeles would lose their rent regulations
on single-family homes, but this did not provide a broad enough political
constituency to mobilize serious opposition. Tenant groups from these jurisdictions
and city governments sent representatives to the public hearings in Sacramento,
but were vastly outnumbered by representatives from the real estate industry,
particularly so-called "Mom and Pop" landlords who were the public
face of the industry campaign. The Western Center on Law and Poverty, an
arm of legal services, led the opposition. It sought to piece together a
coalition of local tenant groups, senior citizens groups, religious groups,
and local governments. The cities of Santa Monica, Berkeley, and West Hollywood
chipped in funds to hire a Sacramento lobbyist to orchestrate a lobbying
and public relations effort to defeat the Costa bill. But Roberti's warnings
had proven accurate. The pro-rent control forces lacked the organizational
infrastructure and grassroots constituency to mount a serious opposition
effort. It was easy for legislators to vote for a bill that would only significantly
affect the small cities of Santa Monica, Berkeley, West Hollywood, Cotati,
and East Palo Alto, the only cities with even a modicum of grassroots tenant
activism. According to one organizer of the pro-rent control coalition,
they considered passage of the Costa/Hawkins bill a "done deal."
Their efforts to stop it was viewed as a "last gasp." Seventeen
years after the post Proposition 13 groundswell of pro-rent control tenant
activism, the legislature was able to pass a statewide pre-emption bill
with almost no political fallout.

Mobile Home Rent Control

Since 1985, bills to weaken rent control in California
have carefully exempted mobile homes. This is no accident. In contrast to
the tenants movement, residents of mobile homes have been well organized
and able to defeat efforts to weaken protections. Mobile home park owners
lack the political clout of their counterparts in the real estate industry.
As a result, rent regulations affecting mobile homes is widespread and shows
little signs of weakening.

Mobile home owners occupy an unusual status. They own their homes, but they
rent the spaces in mobile home parks. Compared with apartment tenants, they
are actually less mobile, because of the size and cost of moving
their structures. Thus they have a major stake in opposing rent increases
and organizing for rent control.

The number of mobile homes in California increased during the l980s as a
result of rising housing prices. There are 375,000 mobile homes in California
parks with about one million residents. Mobile home owners pushed for local
rent control.[131] The first wave of mobile home rent control activity coincided
with the general post Proposition 13 groundswell for rent regulation. For
example, San Jose adopted rent control for mobile homes in 1979.[132] But
unlike the efforts of apartment tenants, the momentum for mobile home rent
control persisted in the l980s and early 1990s.[133] Today, about 140,000
to 250,000 live in rent controlled parks. Eighty-nine cities and counties
have adopted mobile home rent control in the state.[134]

Mobile home owners are older and are "faithful voters." They have
their own political lobby, the Golden State Mobilehome Owners League.[135]
It has 80,000 members statewide, from big cities to small towns.[136] Led
by Jeffrey Kaplan, the owner of several mobile home parks, park owners formed
the CA Mobilehome Parkowners' Alliance in 1988.[137] Over the years, they
have mobilized local and statewide ballot measures, and worked through the
legislature, to abolish rent control for mobile homes.[138]

In 1995, Sen. Raymond Haynes (R-Riverside) filed a bill, on behalf of the
Alliance, to exempt mobilehome parks from rent control. Haynes had received
significant campaign contributions ($7,500) from park owners.[139] The bill
went nowhere. The Alliance then bankrolled the petition drive for the anti-rent
control ballot measure in March 1996.[140] Prop 199, on the March 26, 1996
ballot, would have voided and phased out local rent control laws for mobile
homes.[141] As one news report explained, "Owners went to the initiative
after years of losing battles in the Legislature." The mobilehome park
owners outspent the tenants by 3-1 in the Prop 199 battle: $1.6 million
to $489,000, most of it in small $25 and $50 contributions from tenants.[142]
A later article put the figures at $2.1 million vs. $320,000.[143] The mobile
home residents were well-organized. They engaged in protest rallies, candidates
nights, letters-to-editor of newspapers, guest columns, and other forms
of protest and electoral mobilization. The residents personalized the opposition
campaign by focusing on Kaplan.[144]

A number of major daily newspapers, including the Los Angeles Times,
San Jose Mercury News, and the Sacramento Bee, editorialized
against Prop 199. The Bee's editorial reflected its ambivalence about
rent control. "Rent control usually creates more problems than it solves
-- but there are compelling reasons why this measure should be defeated."[145]
Supporters of Prop 199 included mobile home park owners groups, the state
Republican Party and Republican legislators. Opponents included mobilehome
owners groups, the AARP, the Congress of California Seniors, the state AFL-CIO,
and the state Democratic Party.[146] Opponents also included 14 counties
and 85 cities.[147] City Councils in small and large cities voted to oppose
Prop 199.[148] Prop 199 lost by 61% (3.1 million) to 39% (1.98 million.)[149]
Ironically, the spokesman for the Yes on 199 campaign, Denis Wolcott, which
spent about $2.1 million, said "the money is simply not there,"
to run an effective campaign.[150] During l994 through 1996, anticipating
the state law, a number of cities and some counties passed mobile home rent
control laws.[151]

Comparative
Analysis

What are the key factors that explain the dramatic turnabout
in the fortunes of rent control in Massachusetts and California? Changes
in housing market dynamics in the two states cannot explain the change in
policy, since there was no significant change during the period under discussion
here. Rather the key factors are political and ideological.

Influence of Real Estate Industry

It is difficult to exaggerate the political influence of
the real estate industry, fueled by a combination of political contributions
and grassroots networks. For years, the various components of the industry
-- apartment owners, developers, realtors, managers and lenders -- worked
together to oppose rent control and other tenant protections. This persistence
and unity eventually paid off. Even when the industry lost some battles,
it persisted in fighting the long-term war over rent control, refining its
ammunition and, when necessary, calling for reinforcements. These industry
organizations and their staffs developed close ties to legislators at the
state and local levels over the course of several decades. They have the
staying power to persist in waging their efforts year after year. The deregulation
victories in 1994 and 1995 should be seen as part of this long-term process,
not a sudden reversal of fortune.

In both states, the real estate industry is one of the most powerful political
lobby groups in the state legislature. In Massachusetts, it is one of the
six more generous industries in terms of PAC campaign contributions and
lobbyists' personal contributions to state legislators.[152] In California,
the California Real Estate PAC was the sixth largest contributor ($649,800)
to legislative campaigns during the 1991-92 election cycle. From 1983 through
1993, the Real Estate PAC was among the ten largest PAC donors each year,
ranking as high as third during the l987-88 election cycle.[153] Costa was
one of the industry's favorite beneficiaries.[154] Other industry trade
associations and individuals are major donors. Still as one California real
estate lobbyist noted, "If it had just been `juice,' we would have
gotten rid of rent control a long time ago." Other factors opened a
window of opportunity for the housing industry to get the Costa bill through
the legislature.

In Massachusetts, the Greater Boston Real Estate Board played the role of
coordinating the industry's activities, with strong support from the Massachusetts
Association of Realtors and others. In Massachusetts, the emergence of the
SPOA, representing small property owners, could have undermined the industry's
unity, but quite early in the Question 9 campaign, SPOA and the GBREB joined
forces, linking the ideologically-driven SPOA with the more pragmatic GBREB.
In fact, the emergence of SPOA helped shape the public debate in ways that
helped define the GBREB as "moderate" and its legislative efforts
as a "compromise." The SPOA's willingness to engage in protest
tactics helped make the "abuses" of Cambridge's rent control a
newsworthy story and draw attention to the issue. The fact that it was landlords,
not tenants, engaging in protest was to journalists the equivalent of "man
bites dog." The SPOA lacked the political resources to carry out a
statewide strategy, so its fragile alliance with the major real estate industry
proved useful, even though some of SPOA's members considered the legislative
solution a "sell out."

In California, the California Housing Council, formed in the l970s to represent
the large apartment owners and managers, worked closely with the California
Apartment Association (which represents smaller property owners), the Building
Industry Association, and California Association of Realtors, and others.
The lobbyists for these groups meet once a week "to compare notes."[155]
A split between CAA (representing small apartment owners) and CHC (large
landlords) in California emerged in the late l980s when there was little
likelihood of defeating rent control, but this split was resolved in the
mid-l990s when, according to a CHC lobbyist, "we realized it wasn't
possible to get rid of it entirely" and CAA accepted the need to compromise.[156]
Echoed another lobbyist: "It took awhile for small owners to concede
that we should settle for something short of the complete elimination of
rent control."[157]

The influence of the real estate industry goes beyond its campaign contributions
to local and state public officials. The financial resources of the real
estate industry have been used to constantly put its opposition on the defensive.
As a result, tenants organizations have constantly had to organize to protect
the status quo from further erosion of tenant protections. With their considerable
financial resources, the CHC and the Greater Boston Real Estate Board sponsored
ballot measures or introduced anti-rent control legislation at the state
or local levels that kept tenant groups busy and in a reactive mode. They
also kept filing lawsuits challenging the legality of various tenant protection
laws and then appealing them if and when they lost in lower courts. This
served to sap some of the strength and persistence of tenant organizations.
It also turned so-called "tenants rights" struggles into complex
legal, technical, and legislative maneuvers.

Moreover, the real estate industry is well-organized at the national level.
State and local real estate organizations can draw on the experience, expertise,
and resources of national bodies and each other. For example, in both states,
national real estate industry trade associations and firms have contributed
money to support anti-rent control ballot measures, including the Question
9 campaign. Also, national real estate groups have spent several decades
hiring academics to conduct studies that criticize rent control as a public
policy, while tenant groups generally lack the resources to sponsor comparable
research, and disseminate these studies to state and local groups to use
in their battles against rent control. The findings of this research, repeated
often enough, becomes the "conventional wisdom" among academics.
There is now a cadre of academic experts that the industry uses to testify
before legislative bodies and to speak to the media. For example in the
late l980s, when the Los Angeles City Council was considering renewing (and
even strengthen) its rent regulations, the CHC brought Brookings Institution's
Anthony Downs, who had written a report against rent control sponsored by
a coalition of national real estate industry groups, to Los Angeles to talk
to Council members and staff, the media, and industry officials. In support
of the Costa-Hawkins bill, the CAA and CHC brought several academics to
Sacramento to testify against rent control, summarizing their studies that
had been paid for by the industry. During the Question 9 campaign, the GBREB
hired two academics to conduct studies to support the anti-rent control
arguments.

Finally, the real estate industry was effective at mobilizing its constituency
when its leaders thought doing so was necessary. As one real estate lobbyist
explained, the realtors, landlords, and developers view this behavior as
part of their business activities and spending money for political influence
as a business expense. Unlike some other highly-concentrated industries,
real estate has many small- and medium-size firms among landlords, realtors,
and developers. For example, the California Association of Realtors alone
has over 100,000 members.[158] The industry's professional lobbyists catalyze
this constituency to write letters to newspapers and politicians, arrange
group meetings with elected officials, and attend public hearings.
Weakness and Fragmentation of Tenant Constituency

Even in the best circumstances, the pro-rent control forces
in both states faced overwhelming odds when facing off against the organized
power of the real estate industry. If the tenant groups had any chance of
preserving rent control, they would have had to mobilize their "natural"
constituency of protected tenants and marshall strong support from their
"natural" allies among seniors, labor, housing groups, and other
"liberal" constituencies. In neither state did the tenant organizations
achieve this level of self organization. The tenant constituency was weak,
fragmented, and politically isolated. By the 1990's, the pro-rent control
forces were no longer a protest movement. They had become an interest group,
and a narrow one at that.

Although renters represent a majority of the population in most major cities,
they represent a minority in the larger population of both Massachusetts
and California. Even more important, the number of tenants who would be
directly affected by the loss of rent control was a relatively small subcategory
of all tenants. In both states, rent control exempted public housing, private
developments with project-based subsidies from federal and state government,
and units with Section 8 vouchers and certificates. In Massachusetts, in
particular, this represents a sizable proportion of the residents of rental
housing. In the Boston area, too, the housing stock consists of many two-
and three-unit owner-occupied buildings, whose tenants are also exempt from
rent regulations. In Cambridge, for example, half of all renters were exempt
from rent control.[159] In California, the Costa-Hawkins bill carefully
excluded mobile homes, thus eliminating another potential ally in the fight
to preserve rent regulations.

One could reasonably argue that the real estate industry had already
won the war against rent control when, during the l970s, it used its political
muscle to limit what it called "extreme" or "radical"
rent control to a handful of cities in both states. Moreover, in California
the Costa-Hawkins bill did not seek to abolish all rent regulations. It
allowed cities to adopt or maintain vacancy decontrol provisions. As a result,
tenants in the major cities which already had vacancy decontrol -- San Francisco,
Los Angeles, Oakland, and San Jose, among them -- would not be directly
affected. Only renters in the small cities of Santa Monica, West Hollywood,
Berkeley, East Palo Alto, and Cotati stood to lose protections. In Massachusetts,
Question 9 sought to wipe out all rent regulations and the subsequent legislation
did the same. But only Boston, Cambridge, and Brookline would be affected
by this change in policy, and, by 1994, only Cambridge still had full rent
control. Landlords in buildings with decontrolled units in Boston and Brookline,
which represented the vast majority of units, had already pushed rents to
market levels when units became vacant. Although these tenants in Boston
were still helped by the "grievance" system, it did not provide
the same degree of protection as those handful of tenants who remained in
rent controlled apartments. Tenants in those decontrolled apartments had
little immediate stake in mobilizing to oppose the real industry's deregulation
efforts.

The tenant organizations in Massachusetts and California had been seriously
weakened by the 1990s. One Massachusetts tenant organizer explained that
tenants had become "complacent" about the protections they had.
A California housing activist used the same word in describing the status
of tenant organizing there. Since the demise of CHAIN, tenants groups were
"very poorly organized" and "very fragile," he said.
The handful of lobbyists in Sacramento that work for low-income housing
groups are "disconnected" from any "organized base."

Effective tenant organizing would incorporate a combination of electoral
work, lobbying, and protest activity. In both states, existing tenant organizations
lacked the capacity to mount much more than token mobilization efforts.
During the l970s, tenant activists in both states had helped organize rent
strikes, large rallies and demonstrations, and occassionally civil disobedience.
These activities have two functions. They help solidify the morale and expand
the base of the tenant constituency. They also can help catalyze support
from third parties (such as the media), a topic discussed below. By the
late l980s, tenant groups in both states had ceased engaging in this kind
of protest activity. Landlords did not feel sufficiently threatened to negotiate
directly with tenants or indirectly through elected officials.

The Massachusetts Tenants Organization had turned into an advocacy organization
rather than a organization capable of large-scale electoral mobilization
and mass protest. Funded by foundation grants, with only a handful of staff,
few volunteers, and high turnover among leadership, MTO primarily engaged
in counseling tenants about their rights and testifying at public hearings.
As noted above, tenant groups in Cambridge could mobilize around periodic
crises and regular elections, but they relied on a handful of volunteer
activists. They had no staff, no strong membership base, and no second-tier
leadership. The Brookline Tenants Union, which during the l970s and 1980s
wielded substantial influence in town government, lost influence in the
early 1990s when many of its endorsed candidates were defeated for Town
Meeting and real estate forces in the town weakened the local rent regulations.
In Boston, many of the neighborhood-based tenant organizations -- in the
Fenway, Back Bay/Beacon Hill, Allston-Brighton, and elsewhere -- had ceased
to exist or became empty shells, when key leaders withdrew and funding dried
up. The situation in California was even more problematic. The statewide
tenants group, CHAIN, had collapsed in the mid-l980s. So had the Campaign
for Economic Democracy, Tom Hayden's statewide consumer group. The major
tenants rights group in Los Angeles, the Coalition for Economic Survival,
only had three or four staffpersons who devoted their work primarily to
organizing residents of HUD-subsidized projects. Organizations of private
housing tenants in San Francisco, Oakland, and other major cities had gone
through a similar process of decline. Tenant organization in Santa Monica,
Berkeley, East Palo Alto, and West Hollywood looked similar to that in Cambridge.
Groups could mobilize around election cycles to preserve their regulations,
but lacked strong leadership or mass membership.

The passage of Question 9 and the subsequent legislation in Massachusetts
led to a flurry of tenant organizing and protest, including threats of rent
withholding, but these efforts were episodic and politically ineffective.[160]
Ironically, it was the small property owners in Cambridge, through SPOA,
that utilized these tactics to mobilize opposition to rent control.

In other words, by the time Question 9 and the Costa-Hawkins bill came along,
the tenant constituency was already in a weakened state and unable to mount
an effective opposition campaign. Both real estate industry leaders and
pro-rent control activists share a common assessment of the state of tenant
organizing in the 1990s. One California real estate lobbyist gives credit
to Tom Hayden and others, who recognized rent control as an "excellent
organizing issue" during the l970s and l980s. "He [Hayden] outworked
the other side." But with David Roberti in a position to protect rent
control, "the rent control forces never had to assert themselves"
and became "complacent."[161] The real estate industry strategists
calculated that by the 1990s, "They [rent control forces] don't have
a constituency any more. It's just a few activists. Rent control used to
be a good political organizing issue. That's going away now."[162]
A Massachusetts real estate lobbyist had a similar assessment: Tenant groups
in the Boston area "don't have the army" they had in the 1980s.[163]

The deregulation efforts in 1994 and 1995 owe their success, at least in
part, to the general decline of tenant organization during the prior decade.
In addition, one can see, at least in hindsight, that the pro-rent control
forces made some strategic errors in mounting their campaigns to preserve
rent control in both states. In Massachusetts, the tenants made what one
real estate lobbyist calls a "fatal mistake" to think that Boston,
Cambridge and Brookline would deliver a 70% or 80% margin against Question
9. Another error was to organize much of their anti-Question 9 campaign
as a defense of the principle of "home rule." "Our polling
showed that this didn't resonate with voters."[164] In California,
according to one housing activist, the pro-rent control forces took Nick
Petris' vote for granted, and were shocked when he cast a key vote in favor
of Costa-Hawkins.
External Resources: Money and Allies[165]

From the "resource mobilization" perspective,
a significant factor was the tenant organizations' inability to marshall
external resources in the form of money, allies, and sympathetic media coverage.
According to one former tenant organizer, now a lobbyist for low-income
housing, explained, "We don't have the money to spend on organizing
the base."[166] A real estate industry lobbyist acknowledged the obstacles
to organizing renters: "It's tough. How do you get a mailing list of
tenants? It's difficult to do."[167]

Most tenants are low- or moderate-income. Real estate industry claims to
the contrary, a majority of tenants living in regulated apartments fall
into these categories. Even if they have the capacity to recruit members
and collect dues -- itself a complex and labor intensive task -- it is very
difficult for organizations with low- and moderate-income constituencies
to sustain themselves with dues from members. Thus, if tenant organizations
are to hire staff, rent office space, publish and mail newsletters, and
undertake the other tasks required of grassroots organizations, they have
to attract money from "outside" sources. Since the early 1980s,
this has proved increasingly difficult to do.

Many of the grassroots community and tenant organizations of the l960s and
l970s received funds from a variety of federal programs, such as VISTA,
CETA (the job training program), and others. When President Reagan took
office in 1981, a top item on his agenda was to "defund the left"
-- to withdraw federal funds from groups engaged in liberal advocacy and
organizing. This had a direct affect on tenant organizing. A former leader
of CHAIN, California's statewide tenant organization, acknowledged that
the organization was "never terribly strong." Even in its post-Proposition
13 heyday, it was comprised primarily of a nucleus of activists but "no
real membership base." It was always essentially a "letterhead
organization" with only "one staffperson and some VISTAs."
When, after the Reagan policies took affect, "the VISTAs ran out"
and "CHAIN disappeared." The Reagan administration also eliminated
the CETA program (which provided staffpersons for tenant and similar organizations)
and cut the federal budget for the Legal Services Corporation (LSC). It
also sharply restricted LSC's authority to engage in "advocacy"
activities and work with grassroots organizations. LSC had been a key source
of legal support for tenant organizations in both states. As their budgets
were cut and their hands tied, agencies such as the Legal Aid Foundation
of Los Angeles and Greater Boston Legal Services had a harder time providing
the legal support for organized tenants in terms of negotiating with landlords,
organizing tenant unions, appearing in housing court, and other activities.

To the extent that, during the Bush and Clinton administrations, the federal
government funded tenant organizing, it was exclusively in federally-subsidized
developments, particularly under the various HOPE programs sponsored by
HUD to help create resident management organizations and to help residents
assume ownership of subsidized projects. Because there was money to be had
for organizing (typically defined as "technical assistance"),
a number of key tenant organizations in the two states shifted their priorities
from organizing residents of private apartments (the constituency for rent
control) to organizing the low-income residents of subsidized housing. In
Massachusetts, the Boston Affordable Housing Alliance converted itself to
the HUD Tenants Alliance. Massachusetts Tenants Organization shifted some
staff resources to organizing residents in federally-subsidized "expiring
use" projects. In California, the Coalition for Economic Survival,
a major catalyst for rent control in the Los Angeles area, changed its priorities
toward organizing residents of HUD-assisted buildings.

During the l980s, the major philanthropic foundations concerned with the
problems of affordable housing and urban poverty began to shift their grantmaking
away from community and tenant organizing. Indeed, their ambivalence about
funding groups involved in organizing and confrontational tactics goes back
to the civil rights and anti-poverty movements of the l960s.[168] Starting
in the early l980s, as the shortage of low-income housing and the increasing
visibility of homelessness became public issues, mainstream foundations
began to expand their interest in these problems, primarily by funding non
profit community development corporations (CDCs) engaged in the development
of low income housing. Many of these CDCs grew out of tenant and community
organizing groups. As foundations changed their grantmaking priorities,
however, these organizing groups began to divert their attention toward
"bricks and mortar" development and pay less attention to organizing.[169]
Most foundations did not consciously seek to "co-opt" grassroots
activist in favor of development, but their funding priorities had that
effect. Statewide groups such as CHAIN and the Massachusetts Tenants Organization,
and local tenant groups such as the Symphony Tenants Organizing Project
in Boston and the Coalition for Economic Survival in Los Angeles experienced
the decline of foundation funding support for organizing activities.

Thus, when confronted with a major assault on rent regulations in the 1990s,
the tenant organizations were organizationally unprepared to respond. To
be effective, though they would have had to dramatically expand their collaboration
with their "natural" allies who could help mobilize the money,
volunteers, and voters. Unfortunately for the tenant forces, these "natural"
allies provided to be elusive and did not provide the resources that would
have been necessary to mount a winning defense against the rent deregulation
forces.

In both states, pro-rent control forces generated a long list of groups
that officially opposed the Costa-Hawkins bill and the Question 9 ballot
measure. These included what one housing activists called the "usual
suspects" (housing groups, labor unions, senior citizens groups, liberal
politicians, consumer groups, and others) as well as a few organizations
and individuals who were not among the "usual suspects" crowd.
"On paper, we had everybody and anybody," explained the sole staffperson
of the anti-Question 9 campaign. But when it came to providing money or
volunteers, "it was pretty sparse...Tenants were mainly on their own."[170]
In California, where geographic distance makes it difficult for groups across
the state to work together in any event, the "allies" situation
was even more problematic.

What could these allies have done? They could have sent mailings to members,
lobbied state legislators through phone calls or letter writing, written
letters to local newspapers, donated money, mobilized volunteers to do office
work, staffed phone banks, participated in get-out-the-vote efforts, or
participated in rallies and public hearings. Who were these potential coalition
partners? They include the following:

Tenants in Subsidized Housing and Mobile Homes. Heskin describes
the emergence of "tenant consciousness" in California in the post-Proposition
13 period.[171] The recent experience of tenant self-help efforts in California
as well as Massachusetts suggests that, at least in the 1990s, "tenant
consciousness" was highly segmented into narrow "interest group"-like
politics. In California, residents of mobile homes have traditionally supported
rent control not only for themselves, but for tenants in private apartments.
As noted above, the GSMOL has been a well-organized and effective lobby
for mobile home rent control. GSMOL officially opposed all the Costa bills
and the Costa-Hawkins bill in 1995. But it failed to mobilize its members
around this legislation. Groups working to organize tenants in HUD-subsidized
and public housing projects -- which are exempt from local rent control[172]
-- also officially opposed Costa-Hawkins and Question 9, but did not mobilize
these residents around these issues. Groups working with tenants in public
housing also officially endorsed the pro-rent control efforts, but did not
participate in mobilization efforts.

Housing and Homeless Advocacy Groups. In both states, groups that
work on low-income housing issues could have been expected to join the battle
to defend rent control. Few did so. In Massachusetts, for example, the most
respected housing advocacy group, the Citizens Housing and Planning Association,
which lobbies for state-funded housing programs, remained neutral on Question
9 because, according to one of its board members, its board included major
developers and development attorneys. Organizations that advocate for the
homeless -- such as the Massachusetts Coalition for the Homeless and the
Los Angeles Coalition Against Homelessness, endorsed the efforts against
Costa Hawkins and Question 9, but did not actively participate on the steering
committees or mobilize their constituencies. For the most part, the network
of community development corporations (CDCs) in both states remained on
the sidelines around rent deregulation. The major CDC trade associations,
Massachusetts Association of CDCs and the Southern California Association
for Non-Profit Housing, official endorsed the efforts to defeat Costa Hawkins
and Question 9, but their staffs did not actively participate in the campaigns.
In Boston, two CDCs -- the Fenway CDC and the Allston-Brighton CDC -- played
an active role in the anti-Question 9 campaign. Both groups had emerged
out of tenant activism, their neighborhoods faced with gentrification and
condo conversions in the l980s, and their staffs and board members predisposed
toward political activism. The West Hollywood CDC played a similar role
in California, but the many CDCs in San Francisco and Los Angeles stayed
on the sidelines.

Seniors, Unions, and Consumer Groups. Massachusetts Senior Action,
the California Congress of Senior Citizens, both state AFL-CIO organizations
[173], and many individual unions officially endorsed the tenants' efforts
to protect rent deregulation. The heads of the state AFL-CIOs testified
at hearings and participated in press conferences. They did not, however,
mobilize their unions' financial resources (except for token contributions)
or their members to oppose Costa-Hawkins or Question 9. Similarly, community
organizations in California, such as ACORN, the Industrial Areas Foundation
network, and Concerned Citizens of South Central -- whose constituencies
were composed primarily of low-income renters -- did not mobilize around
the Costa-Hawkins bill. Neither did the consumer-oriented Public Interest
Research Group in either state use their considerable lobbying networks.

In the case of the Massachusetts campaign against Question 9, more money
alone might have made a critical difference, given the narrowness of the
ballot measure's victory. As described above, the SOCC group operated on
a shoestring budget with only one staffperson, no funds for TV commercials,
no funds to sponsor research studies, and only limited funds to do polling
and distribute literature. Had Question 9 been defeated, it is unlikely
that SPOA and the GBREB would have had the political momentum to defeat
rent control in the state legislature. In the case of the legislative fight
over Costa-Hawkins in California, money alone for more staff probably would
not have changed the outcome, given the weakness of the tenant constituency
compared with the real estate lobby.

Other factors involving allies played a role in the victories for the Costa-Hawkins
bill and Question 9 and its legislative twin. For example, in California,
rent control's biggest political supporter, David Roberti, was forced to
retire, while there was no doubt that a Republican Governor would sign any
anti-rent control bill on his desk. In Massachusetts, rent control's biggest
political supporter, Boston Mayor Ray Flynn, left office in July 1993 to
become U.S. Ambassador to the Vatican, while Gov. Michael Dukakis, who lived
in Brookline and would not have signed an anti-rent control law, had been
replaced by libertarian Republican William Weld. In Massachusetts, rent
control lost a crucial ally when Kirk Scharfenberg, the liberal editorial
director of the Boston Globe who had kept the paper's reporting and
editorializing sympathetic to tenant issues, died in September 1992. These
personnel changes made a difference in the pragmatic political maneuvering
that led to rent deregulation.

Legitimacy

Rent control supporters lost the Costa-Hawkins and Question
9 battles primarily because they were outgunned by the real estate industry's
superior financial and political resources. There are no public opinion
polls to gauge changes over time in rent control's favorable and unfavorable
ranking, so it is impossible to say with certainty how the "public"
feels about this policy. But there is little doubt that the real estate
industry was successful in discrediting the very idea of "rent control"
took a beating as a public policy to address housing problems -- if not
among the general public, then at least among opinion leaders and elected
officials.

Rent control has always been controversial, even during
World War 2 when it was imposed to address the housing shortage and help
the war effort. During the l970s, however, rent control was viewed as a
policy to protect vulnerable tenants from rising rents and arbitrary evictions
perpetrated by "greedy" landlords. By the 1990s, the real estate
industry had succeeded in repositioning, if not completely discrediting,
rent control in the public debate. It argued that rent control had become
a policy that protected undeserving affluent tenants and abused small property
owners.

This did not occur overnight or by accident. It was part of a long-term
effort by the real estate industry. Moreover, it occurred in a broader political
environment in which "active government" itself came under assault.
During the l970s and l980s, corporate America engaged in an ideological
assault on government activism.[174] This exacerbated and reinforced public
skepticism about the capacity of government to solve social and economic
problems. Indeed, it directly challenged the role that government had played
in the private economy. Rent control was a weapon in this battle. It became
a convenient symbol of the excesses of government regulation.

The Question 9 ballot measure took place on the same day in November 1994
as what one real estate lobbyist called the "Republican revolution
in Congress" which brought a GOP majority in both Houses and led to
the elevation of Cong. Newt Gingrich as Speaker of the House.[175] The campaign
around the Costa-Hawkins bill in l995 occurred soon after Governor Pete
Wilson had been re-elected and Californians had voted for Proposition 187
(to restrict illegal immigration) and defeated Proposition 186 (to enact
"single-payer" health care reform).

In other words, the changing public mood toward government itself might
be considered the "background noise" in the rent control battle.
Real estate and tenant groups then sought to position or "frame"
rent control in ways that would win public sympathy. In the current political
climate, however, real estate groups had the ideological upper hand. Moreover,
they were able to mobilize their substantial resources to take advantage
of this situation. As one tenant activist explained, the industry helped
frame the issue so that "rent control was seen as the ultimate big
government solution"[176] in a period when "big government"
was not a term of endearment.

As noted above, the real estate industry over the years has used a number
of arguments to attack rent control, but most recently they have sought
to emphasize their claim that it does not help -- in fact, it hurts -- the
poor. The industry effectively co-opted the message of rent control advocates
by arguing that it primarily benefits affluent renters at the expense of
the poor, the elderly, and minorities. Beginning in the mid-1980s, the closely
knit network of conservative think tanks and publications promoted the notion
that local rent regulations led to an increase in homelessness. This idea
was not only picked by the mainstream media but used by conservative members
of Congress and HUD Secretary Jack Kemp to back legislation to withhold
federal HUD funds to localities with rent control.[177] This persistent
drumbeat of negativism toward rent control had a cumulative effect. According
to a California real estate lobbyist, "After 10 or 12 years of fighting
rent control, I think we could make a compelling argument that this form
of rent control did not fulfill its goals. In fact, it had negative impacts.
We had studies and census data and experts who could tell this story."[178]

This public relations effort played up the image of affluent professionals
-- "yuppies" -- monopolizing rent controlled units and living
in "subsidized" apartments, while, in effect, shutting out more
needy renters. The image of West Hollywood, Santa Monica, Cambridge, and
Brookline as havens of yuppie affluence reinforced the real estate industry's
propaganda. On the eve of the Costa-Hawkins and Question 9 showdowns, the
California Housing Council and the Greater Boston Real Estate Board both
sponsored studies that claimed to demonstrate that cities with rent control
had seen a decline in the number of minority or low-income residents and/or
that residents living in regulated apartments were not primarily low-income.
Although these studies had serious methodological flaws, the real estate
industry was able to widely disseminate their findings, while tenant advocates
flailed away, trying to find academics to poke holes in the studies' statistical
methods. Perhaps even more importantly, the real estate industry was able
to "humanize" this point by identifying some high-profile individuals
living in rent regulated apartments. In Massachusetts, the names of Cambridge
Mayor Ken Reeves and Supreme Judicial Court Justice Ruth Abrams repeatedly
appeared in the news media as examples of the "abuses" of rent
control. "I'm forever grateful to Ken Reeves," said Ed Shanahan
of the Rental Housing Association and the GBREB.[179]

Real estate interests were so successful at injecting this view into the
public debate that news columnists and elected officials repeated it as
if it were a truism. Sen. Ray Haynes (R-Riverside) was quoted as saying,
"Rent control deprives the young and the old of affordable housing."[180]
Upon signing the bill, Gov. Wilson called it "a fundamental issue of
fairness for both property owners and those who have artificially been denied
access to quality housing."[181] Even a Boston Globe editorial
opposing Question 9 repeated the canard that in "Cambridge, the rent
control ordinance has indeed been abused by middle-class tenants who can
afford to pay market rents."[182] In fact, those few newspaper editorials
that opposed Costa-Hawkins, Question 9, and Proposition 199 (to abolish
rent control for mobile homes) tended to echo the Globe's view that
while rent control itself was problematic, this approach was too blunt an
instrument. The tenant groups and their sympathetic politicians had no effective
retort to these statements. Even the head of the MTO-led effort was reduced
to the defensive posture that rent control is "not a perfect system"
and that only a handful of tenants who live in regulated apartments are
rich.[183]

The real estate industry had learned to use the phrase "extreme"
or "radical" rent control to describe the laws in Cambridge, Santa
Monica, West Hollywood and Berkeley.[184] By this they meant that it did
not allow vacancy decontrol and that it posed a particular hardship for
small property owners, who were characterized as "Mom and Pop"
landlords. Both the news media and many elected officials picked up this
jargon. It helped to frame the issues so that "vacancy decontrol"
became defined as the "moderate" or "compromise" version
of rent control.

The real estate industry cleverly anointed small property
owners as the public face of the deregulation campaigns. When they needed
people to testify at hearings, to appear on television, or to be interviewed
by reporters, they had a battery of small property owners with "horror
stories" to tell. Interviewees in both California and Massachusetts
used the same word -- "poster child" -- to identify the individuals
who became the representatives of the anti-rent control forces. One real
estate industry lobbyist referred to SPOA's Denise Jillson as a "great
poster girl." A California tenant activist acknowledged that the landlords
had "good poster children" from Santa Monica, Berkeley, and West
Hollywood.

In retrospect, some (though not all) housing activists acknowledge that
the very strict rent control regulations in Cambridge, Santa Monica, West
Hollywood, and Berkeley may have played into the hands of rent control's
opponents. In particular, they cite regulations in Cambridge that prohibited
some condominium owners from living in their own units, and regulations
in Berkeley that allowed the rent board to require large rent rollbacks
because small property owners had misunderstood some technical regulations.
No doubt all of these examples can be justified legally and technically
by rent board staff and rent control supporters. The point of the tenant
activists is that these examples provided ammunition for their opponents
-- examples of government "abuse" that ordinary people could identify
with. One Massachusetts tenant activist acknowledges that during the Question
9 campaign, some Brookline and Boston tenant activists thought that "those
Cambridge tenants ruined it for all of us" by failing to correct some
of the more stringent aspects of that city's rent control law. He noted
that it was no accident that the backlash against rent control was strongest
among small property owners in Cambridge, not Brookline and Boston. A California
tenant advocate acknowledged that Berkeley's strict rent control system
"pissed off even some sympathizers," most importantly, Senator
Nick Petris. None of these people favored eliminating full rent control
in favor of vacancy decontrol. But they argued that by not treating "Mom
and Pop" landlords (small property owners) differently, cities with
strong rent control gave the real estate industry ammunition to use against
rent control and helped ignite the SPOA rebellion in Cambridge. Also, as
noted earlier, the real estate industry was able to stigmatize "radical"
rent control by associating it with the unconventional reputations of Berkeley,
Santa Monica, West Hollywood, and Cambridge.

As noted earlier, the news media, for the most part, framed the battles
over rent control in ways that undermine the tenants' perspective. The controversy
was a constant source of news in the local Santa Monica, Berkeley, Cambridge,
and Brookline newspapers, but it was only irregularly covered in the major
dailies such as the Boston Globe, Boston Herald, Los Angeles
Times, San Jose Mercury-News, San Francisco Chronicle,
and others. The Boston papers paid only sporadic attention to the Question
9 campaign until the last weeks. It then covered the battle in the state
legislature as an "inside politics" fight, focusing on the roles
of Governor Weld and the key legislators. The Globe did offer some
"human interest" stories, equally balancing the hardships of tenants
with those of small property owners. The Boston press paid no attention
to the financial contributions of the real estate lobby, or the close connections
between SPOA and the major real estate groups; indeed, it emphasized the
split between SPOA and GBREB rather than their symbiotic relationship. In
comparison, however, the major California media virtually ignored the battle
over the Costa-Hawkins bill. As one housing activist noted, the issue was
"not on their screen." By 1995, the mainstream media was "tired
of rent control as an issue. They viewed it as an 'old' issue." California's
major newspapers reported the key votes on Costa-Hawkins, but did not cover
the legislative maneuverings or the potential consequences of its passage.
It was viewed almost entirely as a political story. Not surprisingly, most
of the stories about the Costa-Hawkins battle emanated from their bureaus
in Sacramento, the state capital, far from where deregulation would have
the most impact. (Sacramento does not have any form of rent control). It
is not surprising that the battle over rent control received more coverage
in Massachusetts than in California. In Massachusetts, Boston is the state
capital, the major media market, and the geographic area where all rent
control battles have taken place.

Consequences
of Deregulation

Rent deregulation began January 1, 1995 in Massachusetts
and a year later in California. Too little time has passed to thoroughly
analyze the impact of these policy changes on housing markets and on housing
consumers. Moreover, both laws were designed to be gradually phased-in,
so the full implementation and consequences of deregulation were postponed
for several years. There has certainly been an increase in housing hardship
in the localities that experienced rent deregulation. But there have been
no systematic studies of housing conditions in either the Boston metropolitan
or Los Angeles metropolitan areas, or in any of the submarkets in which
rent deregulation took place. Even if such studies existed, however, it
would be difficult to separate the impact of rent deregulation from other
factors such as cuts in federal and state housing studies, state welfare
reform, immigration, population growth or decline, and other demographic
forces.

It is reasonable to argue that rent deregulation had already taken affect
in California and Massachusetts by the late 1970s or early l980s. In other
words, the major cities in both states had already adopted vacancy decontrol
policies. Los Angeles, San Francisco, San Jose, and Oakland adopted vacancy
decontrol from the beginning. Boston had rent control for five years before
it was changed to vacancy decontrol. Other major cities -- Worcester, Springfield,
New Bedford, Fall River, San Diego, San Bernadino, and others -- and most
suburbs and small towns never adopted any reform of rent regulations on
apartments.

By the mid-1990s, only about 75,000 units out of 4.6 million rental units
in California (in Santa Monica, West Hollywood, Berkeley, East Palo Alto,
and Cotati) and about 40,000 units out of 915,617 rental units in Massachusetts
(in Boston, Cambridge, and Brookline) were under rent control. This is a
extremely small proportion of the rental housing stock in both states.[185]
The real estate industry had already won the rent control war. Question
9 and the Costa-Hawkins bill were the final battles in a war of attrition.

An examination of the "impacts of deregulation,"
therefore, must be viewed in this context. San Francisco, Los Angeles, and
San Jose never adopted strong rent controls. Their vacancy decontrol laws
meant that all apartment units would eventually reach market levels and
that market forces, not government regulation, set rent levels.[186] The
impact will be small because the overall number of units affected is so
small. For example, the real impacts of deregulation in Boston began in
l976, when vacancy decontrol initially took affect and the number of units
under rent control fell from about 100,000 to 22,000 in less than a decade.

Former Boston Mayor Kevin White once compared rent control to a tourniquet.
He viewed it as a response to an emergency situation -- in effect, to stop
the bleeding and allow the body (or the housing market) to heal itself.
A Boston housing activist described the impact of deregulation with another
metaphor about bleeding. He said:

"Some people expect the end of rent control to lead to blood in the streets.
That won't happen. It won't happen all at once, so you won't see the pain.
It will be a slow bleed. It won't be easy for reporters to write about, because
it won't be dramatic, it won't happen to lots of people at the same time, it
will be partly hidden from public view. But that doesn't mean it isn't happening.
There will be lots of pain and suffering, but it will happen over months and years."

Whether or not this statement is exaggerated or melodramatic,
it points to an important distinction in understanding the consequences
of deregulation. Even if we could isolate the impact of deregulation from
these other factors, any analysis of this question must separate (a) the
immediate or short-term impact on existing or sitting tenants from
(b) the longer-term impact on the housing market, particularly the availability
of affordable housing.

Immediate Impact on Sitting Tenants

Most of the media coverage and public debate over deregulation focused on
the potential hardship that would affect renters in regulated apartments
once these regulations were lifted.In particular, media coverage and public
debate focus on low-income and elderly renters. How high would landlords
raise rents? Would tenants have much higher rent-to income ratios? Would
tenants face eviction and displacement? Was there a sufficiently high vacancy
rate to absorb displaced tenants at reasonable rent-to-income ratios? Would
tenants be able to remain with reasonable proximity to their previous apartments
in order to maintain access to work, family, friends, health and social
services, religious institutions and other networks. Would the prospect
or reality of these changes affect the physical or emotional health of renters?

With the exception of Santa Monica and Berkeley, none of the cities with
any form of rent control know very much about the characteristics of residents
who live (or lived) in regulated apartments: age, income, rent-to-income
ratio, health status, place of work, and other variables. None of these
cities have conducted systematic surveys of how these renters were affected
by deregulation to answer the questions posed above. Thus, we are left with
indirect indicators and impressions to evaluate the short-term impacts on
sitting tenants.

To some extent, both laws mitigate against dramatic impacts by phasing-in
the implementation of deregulation. As noted earlier, this phasing-in was
a matter of some controversy even within the ranks of the real estate industry
groups. The large landlords and developers successfully argued for a phase-in
period to avoid draconian consequences and media "horror stories."

Massachusetts

The Massachusetts law did not go into effect all at once. Some tenants lost
protections immediately, while others had a one- or two-year delay.[187]
The impact in Boston, Cambridge, and Brookline differed depending on their
age, income, physical disability, the size of their building, and whether
they were in a rent controlled or decontrolled unit.

For example all tenants in Boston's 63,000 decontrolled units -- including
elderly, low-income, and disabled -- faced an immediate end to rent regulations
in January 1995. In these units, once renters moved out, the Rent Equity
Board had regulated rent increases, evictions for "just cause"
and condominium conversion. The Rent Equity Board had no data on the number
of low-income, elderly, or handicapped renters living in these units.

Low-income, elderly, and handicapped tenants in the 22,000 rent controlled
apartments had one- or two-year worth of protections, depending on the size
of their buildings. About 8,000 units lost rent control protections after
the first year (as of January 1, 1996), and the remainder lost protections
a year later.[188] Rent control ended for all units on January 1, 1997.

There was no immediate political uproar after the law began to take effect.
Informants attribute this to several factors. First, the law was
phased-in gradually, so that regulations were not all lifted simultaneously.
There were essentially three phases of the decontrol process -- starting
with all tenants in decontrolled units and all tenants not in protected
categories in rent controlled apartments (who lost all protections immediately),
followed by elderly, low-income, and handicapped tenants in rent controlled
units in small buildings, followed by elderly, low-income and handicapped
tenants in large buildings. While many low-income and elderly renters in
the 63,000 decontrolled units in Boston (and their counterparts in Brookline
and Cambridge) lost protections right away, they were scattered in many
buildings and neighborhoods. There was no critical mass of tenants facing
immediate rent hikes and evictions under the same roof. Second, tenant
groups were unable to mobilize tenants facing immediate rent hikes and evictions
-- in part because the individuals were so spread out and in part because
they lacked the resources to identify and organize them. Third, the
local news media did not pay significant attention to the aftershocks of
rent control until the first phase of deregulation, and then they focused
primarily on the fate of specific elderly renters rather than the impact
of deregulation on the overall housing market. Fourth, the GBREB
and its RHA did an effective job of persuading the news media that landlords
would hold the line on rent increases for vulnerable tenants.[189] The RHA
identified a few examples where landlords limited rent hikes for elderly
tenants in the second and third phases of deregulation. The RHA recognized
that Mayor Menino wanted to look as though he had convinced landlords to
be reasonable and agreed to appeal to its members to "work with"
tenants facing hardship. The RHA claimed it "worked closely with the
Menino administration to weave a multi-layered safety net."[190]

These factors allowed the real estate industry and its allies to claim that
tenants' predictions of the dire consequences of deregulation were exaggerated.
For example, in April 1996 Globe columnist Jeff Jacoby wrote, "It
is 18 months since Question 9 was approved. Rent control is more than 95
percent phased out. There has been no crisis, no emergency, no upheaval,
no explosion of evictions."[191]

The Boston Globe provided anecdotal evidence of how landlords and
tenants were reacting to the immediate or gradual phase-out of rent regulations.
One story reported that, according to the head of the Massachusetts Tenants
Organization, its phone was "ringing off the hook lately with complaints
about landlords raising rents."[192] The paper reported landlords raising
rents in various orders of magnitude: from $493 to $650[193]; from $315
to $450 and from $179 to $700[194]; from $425 to $900[195]; from $469 to
$572, from $465 to $575, and from $560 to $975[196]; from $300 to $800[197];
from $576 to $875, from $304 to $750, and from $158 to $950[198]; and from
$159 to $650[199]. A Globe columnist recounted the tale of three
senior citizens, between 85- and 87-years old, facing eviction by an absentee
landlord from apartments they'd occupied for almost 50 years.[200] Other
stories, however, told of landlords limiting rent increase for vulnerable
tenants or of landlords relieved to be able to raise rents on affluent tenants
who had been paying rents far below the market level.

As the law went into effect, there was considerable confusion regarding
who was and was not eligible under the new law. The city government, tenant
organizations, and local media tried to provide information. The city government
had little to offer renters in the 63,000 decontrolled units facing rent
increases and evictions. "They'd say, "what rights do I have?'
and I'd say, "you don't have any rights,'" explained the director
of Boston's rent control agency. "I had to deliver a lot of sad news.
It's a terrible situation."[201]

Boston's city government waited almost a year after the legislature passed
the law to begin a telephone survey of the residents of rent controlled
units. Many tenants, especially the elderly, were "in denial,"
according to several informants. They did not contact the city agency to
have their income, age, and disability eligibility verified.[202] As of
October 1995, only 700 of the 22,000 (3%) households had qualified for extended
protections.[203] In contrast, 9% of Cambridge's 16,000 rent control households
and 12% of Brookline's 4,200 households qualified, in part because both
cities did more aggressive outreach to renters.[204] But most informants
believe that even these figures significantly minimize the number of eligible
renters in rent controlled units.[205]

Housing groups in the three cities pushed local governments to develop a
plan to assist tenants facing hardship.[206] Boston tenant groups proposed
a plan to provide property tax abatements to landlords who agreed to limit
rent increases and to provide city subsidies to tenants facing rent increases
and eviction. Mayor Menino rejected this proposal.[207] He initially refused
to direct any of the additional property tax revenues expected from deregulation
to housing assistance. Instead, the city government's response was to give
priority to low-income and elderly tenants facing eviction from deregulation
in the allocation of 250 federal Section 8 certificates, to reorganize the
Rent Equity Board into a counseling agency called the Rental Housing Resource
Center, and to lean on the RHA to urge landlords to be reasonable with rent
increases and evictions.[208] Right before the third phase of decontrol
was to begin, and under pressure from senior citizen organizations and community
groups, Menino pledged $2 million in city funds (from the city's Housing
Trust Fund, a depository for linkage funds, which had been used to support
affordable housing development)[209] to provide rent subsidies for poor
elderly tenants about to lose their protections.[210]

In Cambridge, the City Council voted to target a portion of the increased
property tax revenue expected from deregulation to expand the stock of subsidized
housing. City officials estimated that property tax revenues would increase
by about $4 million; they allocated at least $2 million a year over five
years towards housing programs. The funds would be used to help tenants
purchase homes (with the city attaching resale restrictions to maintain
long term affordability) and for the city to purchase condominium units
to add to the inventory of public housing. Cambridge housing officials decided
not to use these funds to provide housing vouchers on the grounds that they
would not add to the inventory of permanently affordable housing and because
they feared that landlords would simply raise rents, forcing the city to
spend even more money to subsidize tenants. In addition, the Cambridge Housing
Authority is giving preference in its public housing units to eligible tenants
displaced by deregulation.

There are some indirect indicators of hardship from the immediate deregulation
faced by the majority of tenants, and during and after the two-year phase-in
period facing the minority of tenants. These include the following:

In 1996, Boston rents increased by 14%, from $880 to $912 for a typical
apartment.[211]

During that year, the rental vacancy rate for market-rate apartments dropped
to 1%; in Brookline it dropped to 0.7%.[212]

Boston's 1995 census of homelessness found 5,299 homeless people, a 10%
increase from the previous year.

In January 1995, the Boston Housing Authority had 21,600 applicants on
its waiting list as well as 14,000 applicants for 200 federal rental certificates.[213]
Both the BHA and the Cambridge Housing Authority closed their waiting lists
because it was so long.

Both the Boston and Cambridge housing authorities are finding it more
difficult to place tenants with federal Section 8 vouchers and certificates
in private apartments because market rent levels are now much higher than
the Section 8 Fair Market Rents (FMRs) set by HUD.

The number of tenants contacting the Massachusetts Tenants Organization
seeking assistance increased "dramatically" after the law initially
went into effect in January 1995 and jumped again after the full deregulation
took effect in January 1997.

California

The Costa-Hawkins bill took effect in January 1996 but
its implementation is phased in over three years. It permits cities to employ
vacancy decontrol (with re-control). In other words, it deregulates rental
housing gradually as tenants vacate apartments voluntarily or for non-payment
of rent. (In contrast, the Massachusetts law deregulated all rental housing
within two years. Also, unlike the Massachusetts law, Costa-Hawkins has
no means-test provision).

Under Costa-Hawkins, landlords will be allowed to increase
rents, no more than twice between 1996 and 1999, but the greater of 15%
above the then-existing Maximum Allowable Rent (MAR), as set by local rent
control boards, or an amount such that the total rent does not exceed 70%
of the Fair Market Rent (FMR) in Los Angeles County, as set by the U.S.
Department of Housing and Urban Development. Beginning January 1, 1999,
rent increases on vacated units will be deregulated. So long as tenants
currently (as of January 1996) in rent controlled apartments remain in these
units, they will continue to be subject to rent control -- in other words,
landlords will be allowed to increase rents as approved by the Rent Control
Board.

The Costa-Hawkins bill will not eliminate the re-control provisions in Los
Angeles, San Francisco, and several other cities with vacancy decontrol,
but it will primarily affect those cities with full rent control. These
include Santa Monica (86,000 population, 68% rental units, 28,200 rent controlled
units), West Hollywood (36,118 population, 88% rental units; 19,300 rent
control units) Berkeley (102,724 population, 48% rental units, 21,000 rent
controlled units), East Palo Alto (23,452 population; 53% renter units;
2,700 rent control units), and Cotati (6,455 population, 600 rent control
units). From a statewide perspective, the overall number of units under
rent control is quite small, but in each city the number represents a substantial
proportion of its housing stock. The impact will not felt, however, all
at once. Tenants will be protected by rent control as long as they stay
in their units.

One immediate consequence of Costa-Hawkins, at least in Santa Monica, is
the decline in the number of rental units available for renters with Section
8 certificates and vouchers. Prior to Costa-Hawkins, landlords in Santa
Monica were eager to accept Section 8s because the Fair Market Rents (FMR)
were often higher than the allowable rents under rent control and units
were exempt from rent control so long as they had Section 8s. Once Costa-Hawkins
passed, the number of landlords willing to accept Section 8s has dwindled.
In fact, some landlords are holding units vacant until January 1, 1999 (when
all rent regulations are eliminated) rather than rent to new tenants, including
Section 8 holders. Current FMRs for the Los Angeles/Long Beach area, which
includes Santa Monica, are $675 for a one-bedroom apartment, $854 for a
two-bedroom apartment, and $1153 for a three-bedroom apartment. If landlords
are willing to forgo these rent revenues, it suggests that market rents
in Santa Monica are even higher.[214]

In terms of short-term impact, a major concern is the threat that landlords
now have an incentive to encourage tenants to vacate units so they can be
free of rent regulations. Some tenant activists warned that the Costa-Hawkins
bill will lead landlords to harass tenants to vacate their rent controlled
apartments. Staff at the Santa Monica rent board and several legal services
attorneys indicated that, indeed, they have knowledge of such increased
harassment, but they were unable to quantify the magnitude of the increase.
Santa Monica passed an anti-harassment law in July 1995 to address this
threat.[215]

The impact of deregulation in Santa Monica and other rent control cities
depends on the rate of turnover of regulated units. Between January 1996
(when the law took effect) and May 5, 1997, landlords of over one-fifth
(6,354) of the approximately 28,200 rent controlled units in Santa Monica
had already registered a vacancy and applied for a vacancy rent increase.
Of these, 790 were filing for their second vacancy.[216]

A survey of Santa Monica households found the following:
"Average incomes of households in rent-controlled units are significantly
lower than households in uncontrolled units and below those of tenants in
rent-stabilized units in West Los Angeles. Median household income for tenants
in rent-controlled units is $27,000, compared with a median of $42,500 in
non-controlled units. In West Los Angeles in 1992, median income for households
in rent stabilized units was $32,500. Adjusting for inflation, there has been a
decline in real median income among households in controlled units between
1986 ($30,623 in 1994 $) and 1994 ($27,500)."[217]

The survey found that almost three-quarters of the households
in rent controlled apartments meet federal guidelines for low- and moderate-income.
Tenants in Santa Monica's rent controlled units stay in their units longer
than those in other units. They also have lower rent-to-income ratios. Even
so, almost half (45%) of households in rent controlled units were paying
more than 30% of their incomes for rent, despite the fact that their rents
were considerably below the market level.[218] Impressionistic evidence
from knowledge sources in Boston and Cambridge suggest a comparable profile
of tenant in rent controlled units and compared with renters in nearby cities.[219]
When these tenants move -- assuming their incomes do not dramatically increase
and that they remain in the Los Angeles area -- it is very likely that they
will pay higher rents and have higher rent-to-income ratios.

Impact on Availability of Affordable Housing

What will be the long-term impact of deregulation on the overall housing
market, particularly the availability of housing affordable to low- and
moderate-income households? It is a certainty that as deregulation takes
effect, rents in the deregulated apartments will rise - the only question
is, how much? A related question is whether, as rent levels in the deregulated
apartments increase, landlords will raise rents in the non-regulated sector
to their "equilibrium" level? Another question is whether deregulation
will trigger a significant increase in new rental construction and, should
this take place, whether the addition of these new apartments will stabilize
the rental market to some "equilibrium" level? These questions
cannot be answered with much certainty, but we can identify some key trends,
indicators, and impressions from informed sources that allow us to make
some tentative forecasts.

During much of the 1980s, the Boston, Los Angeles, and San Francisco areas
were among the hottest housing markets in the nation. Indicators include
both the pace of price increases and the absolute price levels. The rental
market paralleled the home sale market in these three metropolitan areas.[220]
During that decade, these areas consistently had among the highest rents
in the country.[221] These three areas were among the "least affordable"
of all metro housing markets, measured by the gaps between median incomes
(or wages) and housing prices (and rents), such as the quarterly reports
from the National Association of Realtors' housing affordability index.
A 1987 analysis of wage/home price ratios in 49 metro areas found Boston
the least affordable area, followed by Anaheim, Hartford, New York, Providence,
San Francisco, San Diego, and Los Angeles.[222] Ranking 44 metro areas in
terms of the proportion of renters paying more than 30% of their income
for housing in 1989, San Diego ranked first (57.7%), San Francisco ranked
second (54.1%), Miami/Ft. Lauderdale (53.9%) ranked third, Los Angeles ranked
fourth (52.8%), San Jose and Minneapolis/St. Paul (both 50.7%) tied for
fifth, and Boston (49.8%) ranked seventh. One study in the late l980s calculated
that it would cost $106 million a year to provide every low- and moderate-income
renter household in Boston with enough subsidy to bring the rent down to
30 percent of household income.[223]

Case argues that the housing boom in these areas was due as much to psychological
as economic factors -- sellers, buyers, and agents, along with the media,
contributed to bidding wars for housing.[224] Sooner or later this speculative
bubble was bound to burst. Around l989, in both the Boston and Los Angeles
housing markets, prices began to decline. Even so, their absolute levels
were still among the highest in the nation and during the housing recession,
prices did not go back to pre-boom levels. Both regions experienced an economic
recession that exacerbated the housing "bust." Housing prices
in the Bay Area followed a similar pattern. Despite the recessions, housing
affordability levels did not improve, because incomes for low- and moderate-income
households fell along with rent levels. As a result, in 1990 Los Angeles
and San Francisco central cities had among the highest proportions of low-income
renters with severe rent burdens (defined as housing costs that are 50%
or more of household income). The Boston figure was not among the top primarily
because it had a very high proportion of federal- and state- subsidized
housing apartments compared with other cities.[225] Among those renters
in nonsubsidized apartments, the proportion with severe rent burdens was
considerably higher than most other cities.

By the mid-l990s, both Boston and Los Angeles emerged from recession and
housing prices began to increase, while price levels in other California
housing markets, including Bay Area and the Silicon Valley (San Jose area),
began to rise significantly.[226] A study of 1995 rent levels in major metro
areas ranked San Francisco first, followed by Washington, Los Angeles, Boston,
San Diego, and New York. The ranking of median home prices found San Francisco
first, followed by Boston, New York, San Diego, and Los Angeles.[227] A
1995 study of the least affordable metro area markets for single-family
homes ranked San Francisco first, followed by Honolulu, Los Angeles, New
York, Oakland/East Bay, Boston, San Diego, and San Jose.[228] A 1996 study
of rental affordability -- comparing median renter income with Fair Market
Rents -- found that more than half of renters in the Los Angeles and San
Francisco areas, and close to half in the Boston area, were unable to afford
rental housing.[229]

Immediately after deregulation in Massachusetts took effect -- between February
1995 and February 1996 -- average rents for market-rate units in Boston
rose $100 (13%), from $802 to $903. Vacancy rates fell sharply, from 4.5%
to 1.8% in the city of Boston and from 4.2% to 1.4% in the Boston metro
area. Vacancy rates in private assisted apartments (with state or federal
subsidies) was 0.7%.[230] A year later, rents averaged $917, with the vacancy
rate at 1.67%. In the metro Boston area, average rents were $940 and the
vacancy rate was 1.34%[231] In other words, people uprooted by deregulation
in Boston -- and, in general, low-and moderate- income households seeking
rental housing -- had few places to look within the city or in the surrounding
area. Comparable figures for Santa Monica and other rent control cities,
or the Los Angeles and San Francisco metro areas, were not available. In
1996, rents in San Francisco rose 24% rise in the 15 months after January
1995. In May 1996, the city's rental vacancy rate was about 2%. Surveys
revealed that San Francisco rents (an average of $1105 at the end of 1995)
were the highest in nation except in Manhattan.[232] Data from Los Angeles
suggest that low-income households displaced from Santa Monica or West Hollywood
will have difficulty finding affordable housing in Los Angeles, where overall
vacancy rates are low, affordable housing is scarce and increasingly at
risk, and rent-to-income ratios far exceed national averages.[233]

A review of the state's housing market at the end of 1996 indicated that
"rents went through the roof this year and by year's end there were
few if any rooms at the inn, let alone apartment complexes."[234] At
least one California real estate official fears that there could be a renewed
interest in rent control, especially in "hot" housing market areas
like the Santa Clara Valley.[235] Renters in Milpitas pushed the City Council
for rent control.[236] Tenants in Cupertino, where some rents increased
30% at once, started a tenants union and circulated a petition for rent
control.[237]

In this context, the deregulation of rental housing is likely to have a
significant impact on the availability of affordable housing in the target
cities and on the future demographic composition of these cities and their
neighborhoods. This statement is based on some key facts. In general, residents
of rent controlled and rent regulated apartments have lower incomes that
the residents of non-regulated apartments. Indeed, the majority of tenants
in rent controlled units in California fall within the low- and moderate-income
categories. Moreover, the profile of renters in these cities reveals a higher
proportion of low- and moderate-income households, a lower median income,
a higher proportion of seniors, and lower rent-to-income ratios than in
adjacent cities without rent control.[238] (For example, the average Santa
Monica household in a rent controlled apartment pays 28% of household income
for rent compared with 37% for households in uncontrolled units.[239]

The apartments lost to the rent control inventory represent about 12% of
Boston's housing stock, 37% of Cambridge's housing stock, and 20% of Brookline's
housing stock. In Santa Monica, the 28,000 rent controlled units represent
about 60% of the city's housing stock. One study estimates that by 2003,
between one-half and three-quarters of Santa Monica's rent controlled stock
will be decontrolled. Given projected rent increases, these will no longer
be affordable to low- and moderate-income households. Among those units
that do turn over once between 1996 and 1999, average rents are expected
to increase between 23% and 25%. By 2003, cumulative rent increases are
predicted to increase between 46% and 48%. Even within the remaining
stock of rent controlled apartments, allowable rent increases under the
Costa-Hawkins formula could reduce the proportion of units affordable to
low-income households from 45% in 1995 to 24-30% by 2002.[240] Apartments
in East Palo Alto currently rent for about half what they cost in neighboring
cities. According to a member of the East Palo Alto rent stabilization board,
the Costa Hawkins law "means East Palo Alto will be gentrified..."
Within ten years, "East Palo Alto will look like Palo Alto," a
much more affluent city.[241]

Other factors suggest an intensification of competition for rental housing
in the Boston area, the Los Angeles area, and the San Francisco area, a
trend that will push rents higher. All three metro areas are experiencing
population growth. Moreover, the supply of subsidized housing is at risk
due to federal housing policy changes. Boston, in particular, has a large
inventory of Section 8 developments and other developments facing expiration
of low-income use restrictions.[242] In both Massachusetts and California,
state housing programs have been contracted since the late l980s; state
housing finance agencies are not sponsoring new rental housing construction
in either state. At the same time, changes in federal welfare policy will
reduce the incomes of many low-income households. Rising rent levels and
the reduction of subsidized housing will make it even more difficult for
low income households to find affordable housing.

Some argue that a significant increase in new rental housing construction
could offset these trends. Rent deregulation has seen an increase in rehabilitation
and remodeling of existing rental units in Boston, Cambridge, and Santa
Monica, but there has not been any significant increase in construction
of rental housing since the deregulation laws took effect in both areas.
According to the mayor's housing policy advisor in Boston, developers claim
that they need rent levels of about $2,000 to make the investment sufficiently
profitable and that, with the exception of a few downtown neighborhoods,
the Boston housing market has not reached that level.[243] Perhaps a rental
housing construction boom will emerge, but it has not yet been seen. Moreover,
what new construction is currently in the pipeline is almost entirely market-rate
and luxury apartments. There is much debate among housing experts about
the so-called "filtering" process -- whether an increase in rental
housing at the upper tier of rents loosens the rental housing market in
older units. There is considerable evidence that an increase in market-rate
and luxury housing may have the opposite impact -- leading to "filtering
up" (gentrification) rather than "filtering down."

The most likely scenario is that housing affordable to low- and moderate-income
households will decline both in absolute numbers and as a proportion of
the rental housing stock in cities where rent control has been or is in
the process of being eliminated. As a consequence, rent-to-income ratios
for existing [244] and future renters will increase. This will have an importance
beyond the household or the housing market; it will mean that renters, with
less discretionary income, will spend less on other goods and services,
including basic necessities such as food and clothing as well as other items.
This will have a negative impact on the larger economy as the effective
demand for non-housing goods and services declines. One can expect an increase
in overcrowding as tenant households facing rising rent-to income ratios
and lower vacancy rates respond by doubling-up. Even with rising rent-to
income ratios and increased overcrowding, it is likely that the number of
low- and moderate income households will decline in absolute numbers and
as a proportion of the populations of formerly rent controlled cities. These
communities will lose some of their economic and social diversity. The bonds
of "community" -- reflected in social ties -- may begin to diminish.
It is impossible to put a price-tag or to quantify this aspect of a city's
quality of life.

Appendix:
Arguments For and Against Rent Control

There is much debate about the short-term and long-term
consequences of rent control. While advocates argue that rent controls are
necessary to keep rent increases in line with tenants' incomes, opponents
counter that in the long run controls will contribute to the very crisis
they seek to address. By lowering profits, it is argued, rent controls will
ultimately lead to lowered investment in rental housing: new construction
will cease, maintenance will decline, and even homelessness will result.
Worse, it is argued, rent control does not even reach those lower-income
tenants who need it most, primarily benefitting upper-income tenants. These
arguments provide the principal rationale behind efforts to restrict the
ability of localities to enact rent control -- to "pre-empt" local
governments regulating rents.

There's much academic and political debate about these topics, most of which
have been subject to empirical tests. Unfortunately, much of the debate
around rent control is based on hypothetical arguments rather than empirical
research that examines the experiences of communities that have enacted
rent control programs. Thus, there are many myths about rent control that
inhibit a healthy public discussion about its pros and cons. In fact, there
has been considerable empirical research on the impact of rent control.
Quite a few of these studies have been sponsored by various real estate
industry organizations. Studies conducted by independent researchers, however,
conclude that rent control does not have adverse consequences for new construction,
maintenance, and other measures of the level of investment in rental housing.[245]
But these studies do not diffuse the controversies, since the various sides
appear to be talking past each other. Indeed, both sides tend to view these
studies as "ammunition" to use in their lobbying and public relations
efforts. Not surprisingly, the real estate industry has greater resources
to invest in academic studies, so most of these reports emphasize the negative
consequences of rent control.

Some people may support rent control as a "last resort," but believe
that providing needy people with rent subsidies is a more efficient way
to help house people who really need it. Unfortunately, less than one-third
of all households eligible for federal rent subsidies receive them. Providing
rent subsidies to all low-income households who are currently paying
over 30% of their income in rent (the accepted "affordable" housing
guideline) would cost at least an additional $50 billion. One study of Boston
in the late l980s found that providing subsidies to all low- and moderate-income
households who were paying more than 30% of their income in rent would cost
$150 million a year. Further, the real estate industry, the major opponents
of rent control, have not been active supporters of efforts to increase
federal housing subsidies for the poor. Moreover, rent control advocates
argue that it is more cost-effective for taxpayers than providing direct
subsidies. One recent study estimated that if Santa Monica, West Hollywood,
and Berkeley abandoned their rent control program, it would cost the state's
taxpayers about $160 million a year simply to maintain the existing levels
of affordability provided by rent control.[246]

Some people mistakenly believe that rent control freezes rents and makes
it unprofitable to own rental housing. In fact, every rent control system
calls for annual across-the board rent increases tied to the cost of living
or cost increases. They all also provide for individual rent adjustments
to ensure landlords a "fair return" on their property, although
definitions of "fair return" vary. These adjustments allow rents
to keep pace with increasing costs and to allow landlords to make capital
improvements. Landlords are assured of making a reasonable profit. Rent
control, in this view, simply limits rent gouging and speculation.

Some argue that rent control leads landlords to defer maintenance. Experience
reveals that it doesn't, because in order to receive a rent increase, local
rent control laws require landlords to maintain their properties
in accordance with health and safe code regulations. As a result, rent control
actually encourages better maintenance. More of the tenants' rent
goes toward building maintenance in cities with rent control than in cities
without it.

Some argue that rent control lead landlords to abandon their buildings.
Common sense and hard reality suggests otherwise. In California, for example,
Santa Monica and West Hollywood have the strongest rent control laws in
the state, but there are almost no abandoned apartment buildings in either
city. Nor do these rent control cities have the blight of foreclosed apartment
buildings owned by banks and federal government agencies (such as the FDIC
and RTC) that is common in much of California. The same story was true in
Cambridge and Brookline, Massachusetts, when these cities had very strong
rent control regulations.

Real estate groups argue that rent control discourages builders and banks
from investing in new rental housing. In fact, almost all rent control laws
exempt new construction. No jurisdiction has suggested that it would
ever reverse this commitment. Many cities with rent control have experienced
an increase in apartment construction during the past decade. In
Santa Monica alone, about 1,000 apartments were built between l987 and l993.

Rent control's critics claim that it mainly helps "yuppies" and
other affluent tenants who "hoard" the apartments. As a result,
they say, rent control hurts the elderly, the poor, and people of color,
who really need rental housing but are "locked out" of the rental
market because units are occupied by those who do not need below-market
housing. Some have even gone so far as to argue that rent control causes
homelessness for these reasons. The real estate industry can certainly point
to a few upper-income people living in these apartments -- anecdotes they
use to make their point. But these are the exceptions, not the rule.[247]
And to focus on these exceptions is ironic, if not hypocritical, because
it is landlords decide who will rent their units. But, in fact, rent
control encourages economic and social diversity. The vast majority of renters
living in apartments covered by rent control laws are low- and moderate
income and/or elderly households.

In the most recent analysis, Allan Heskin and his colleagues at UCLA carefully
examined neighborhoods in East Palo Alto, Berkeley, Santa Monica, and West
Hollywood (all cities with vacancy control) and compared them with comparable
neighborhoods in adjacent cities without vacancy control. Their study
demonstrates that in the four California cities with the strongest rent
control laws, the mix of renters -- including the elderly, the poor, and
people of color -- remained relatively constant between l980 and 1990. Without
rent control, low-income tenants, and people on fixed incomes, would face
constantly rising housing costs. Many would face displacement. The most
important implication of the UCLA report is that rent control promotes community
stability and an economically. racially, and socially diverse population
mix.

The real estate industry complains that rent control is complex to administer
and gets mired in bureaucracy.[248] In fact, with proper compliance by landlords,
rent control is very simple to administer. With the advent of computers,
rent control is even simpler to implement. In Santa Monica, for example,
costs have not varied by more than $2/unit per month in the last five years.
Most of the expense is due to landlords refusing to comply with the law
or mounting extensive administrative and legal challenges to its operation.
Even so, in Santa Monica, tenants pay the full cost of rent control. In
West Hollywood and Los Angeles, tenants and landlords split the cost. In
Santa Monica, landlords who want a rent increase beyond the annual
general adjustment simply have to submit an application listing their expenses
and income. Even the cost to landlords of getting professional help is included
in the rent increase. Full pass-throughs for earthquake-related improvements
have been put on a simplified fast track (30-60 days) basis.

Some argue that rent control is not needed because housing prices and rents
are no longer escalating as they did in the l980s. Indeed, during the early
1990s housing prices and rents in some housing markets actually declined
and vacancy rates rose, making it easier for low-income renters to find
affordable housing. In fact, the recession made things even worse. Lay-offs
and unemployment make many families' housing situation even more precarious.
Where rent levels declined, it was almost entirely at the high end of the
rental market. Similarly, most vacant apartments were in the expensive units.
Meanwhile, in the Boston, Los Angeles, and San Francisco are housing markets
(even before the earthquakes that shook Los Angeles and the Bay Area), waiting
lists for subsidized apartments were long and growing. Now, these waiting
lists have expanded even more. One symptom of this shortage is the rise
in homelessness, especially among families with children. Before the earthquake,
an estimated 60,000 people were homeless in the Los Angeles area alone.
Among Los Angeles' homeless population, an estimated 40% are families, as
many as a third are employed, and over a third are veterans.

Author
Bio

Peter Dreier is the Dr. E.P. Clapp Distinguished Professor
of Politics, Professor of Sociology, and Director of the Public Policy Program,
at Occidental College in Los Angeles. He joined the Occidental faculty in
January 1993, after serving for nine years as the Director of Housing at
the Boston Redevelopment Authority and senior policy advisor to Boston Mayor
Ray Flynn.

A native of New Jersey, he received his B.A. degree in journalism and sociology
from Syracuse University and his Ph.D. in sociology from the University
of Chicago. From l977 to l983, he was on the faculty at Tufts University.
During the l980-l98l academic year he was awarded a Public Service Fellowship
from the National Science Foundation.
Dreier has written widely on urban politics, housing policy, and community
development. He is a regular contributor to American Prospect and
the Los Angeles Times. His articles have also appeared in the Harvard
Business Review, Social Policy, Urban Affairs Quarterly,
Journal of the American Planning Association, North Carolina Law
Review, Challenge, Housing Policy Debate, National
Civic Review, Planning, International Journal of Urban and
Regional Research, Real Estate Finance Journal, Journal of
Urban Affairs, Columbia Journalism Review, Washington Journalism
Review, Social Problems, Housing Studies, Journal of
Housing, Canadian Housing, Foundation News, Media and
Society, and other professional journals. He has also written for the
New York Times, Washington Post, Boston Globe, Newsday,
Chicago Tribune, Philadelphia Inquirer, Nation,New
Republic, Washington Monthly, Progressive, Dissent,
Commonweal, Dallas Morning News, Houston Chronicle,
Sacramento Bee, San Jose Mercury, Cleveland Plain Dealer,
and elsewhere.

He recently completed a two-year study with three colleagues on the relationship
between regional economic development, community economic development, and
poverty in greater Los Angeles. This study, Growing Together: Linking
Regional and Community Development in a Changing Economy, was funded
by the Haynes Foundation. His book, Struggling for the American Dream:
Housing Politics and Policy, will be published in 1998.

In l987, while serving in Boston's city government, Dreier drafted the Community
Housing Partnership Act, legislation sponsored by Congressman Joseph Kennedy
and Senator Frank Lautenberg, which became part of HUD's new HOME program,
created under the National Affordable Housing Act of 1990. This legislation
provides federal funds to community-based non-profit housing development
organizations. He also worked on legislation to strengthen the Community
Reinvestment Act and to provide additional federal funds for low-income
and homeless persons.

In 1993, the Clinton administration appointed Dreier to the Advisory Board
of the Resolution Trust Corporation (RTC), the Savings-and-Loan clean-up
agency. He currently is a board member of the National Housing Institute,
the Southern California Association of Non Profit Housing, and the Pacific
Housing Alliance, on the advisory board of the Liberty Hill Foundation and
the Lewis Center for Regional Policy Studies at UCLA, and the editorial
boards of Urban Affairs Review and Housing Studies. He has
served as a consultant to the U.S. Department of Housing and Urban Development
(HUD), VISTA, the Connecticut Conference of Municipalities, the U.S. Conference
of Mayors, the MacArthur Foundation, the Boston Foundation, Discount Foundation,
ACORN, the Industrial Areas Foundation, Oxfam, and other government, community,
and philanthropic organizations. He also served as chair of the Advisory
Committee of the Spivack Program in Applied Social Research and Policy of
the American Sociological Association. He served for almost a decade on
the board of the National Low Income Housing Coalition.